The Securities and Exchange Commission (the “SEC”) recently made changes to foreign private issuer1 reporting requirements that are designed to enhance information currently available to investors. Additionally, the revised disclosures aim to assist foreign private issuers in the flow of cross-border capital by creating enhanced transparencies for investors that build confidence in the foreign private issuer. The final rule regarding changes for foreign private issuer reporting requirements will become effective on December 6, 2008 and is available at

A brief explanation of the current and revised (or new) reporting requirements is set forth below.

Annual Determination of Foreign Private Issuer Status

  • Current Requirement
    • Foreign private issuers must continuously monitor their status. If there is a mid-year change to their status, they are required to file forms, and become subject to SEC substantive regulations (principally the proxy rules and the so-called “short swing profit” rule), in line with their altered status as being treated equivalently with domestic issuers.
  • Revised Requirement
    • A foreign private issuer will determine its status once a year on the last business day of the issuer’s second fiscal quarter.
    • A foreign private issuer whose status has changed to domestic filer on the last business day of its second fiscal quarter will be given until the first day of the fiscal year following the determination date to begin using domestic filer forms.
    • If an issuer newly qualifies as a foreign private issuer, the issuer must immediately begin filing under the foreign private issuer reporting system.

Acceleration of Form 20-F Filing Deadline

  • Current Requirement
    • A foreign private issuer must file a Form 20-F annual report six months after the end of the previous fiscal year, as compared to the no more than 90 day filing requirement applicable to domestic issuers.
  • Revised Requirement
    • For fiscal years ending on or after December 15, 2011, the filing deadline for annual reports on Form 20-F will be within four months after the issuer’s fiscal year end.The SEC views this as consistent with reporting requirements generally applicable on foreign exchanges.

Segment Data

  • Current Requirement
    • Certain foreign private issuers who present financial statements in full compliance with generally accepted accounting principles in the United States (“U.S. GAAP”) and report under Item 17 of Form 20-F are allowed to omit segment data from their financial statements while still being able to obtain a U.S. GAAP audit report despite the omission.
  • Revised Requirement
    • The Form 20-F instruction that permits these foreign private issuers to omit segment data from their U.S. GAAP financial statements has been eliminated.
    • All foreign private issuers will therefore present segment data as part of their financial statement filings on an equivalent basis to domestic issuers.
    • The compliance deadline is the foreign private issuer’s first Form 20-F annual report for the fiscal year ending on or after December 15, 2009.

Enhanced Financial Reporting

  • Current Requirement
    • Foreign private issuers that list only a class of securities on a national securities exchange, or that register only a class of securities under 12(g), without a public offering may provide financial statements in accordance with Item 17 of Form 20-F either in accordance with U.S. GAAP or International Financial Reporting Standards as adopted by the International Accounting Standards Board (“IFRS”). If the financial statements are prepared pursuant to any other method of accounting, the foreign private issuer must also provide a reconciliation statement with U.S. GAAP.
  • Revised Requirement
    • The new reporting requirement includes the previous requirement but will be expanded.
    • Foreign private issuers that currently prepare financial statements in accordance with Item 17 of Form 20-F will be required to provide complete U.S. GAAP reconciliations in accordance with Item 18 of Form 20-F. There is still the opportunity for limited Item 17 U.S. GAAP reconciliations for third party financial statements that are included in the foreign private issuer’s annual report or registration statement.
    • Foreign private issuers may still file financial statements according to IFRS without reconciling those statements with U.S. GAAP.
    • Foreign private issuers that currently prepare financial statements according to the previous rule are not required to change to the revised rule until the company’s first annual report on Form 20-F for the fiscal year ending on or after December 15, 2011.

Changes in Accountants and Auditors

  • Current Requirement
    • Foreign private issuers are not required to disclose changes in accountants and auditors or to disclose the reasons why a change occurred. This is inconsistent with the reporting requirements for domestic issuers.
  • Revised Requirement
    • Foreign private issuers will be expected to make the same disclosures as domestic issuers in their Form 20-F about changes in accountants and disagreements with certifying accountants. As such, foreign private issuers will be required to disclose:
      • whether an independent accountant that was previously engaged as principal accountant to audit the issuer’s financial statements has resigned, declined to stand for re-election or was dismissed;
      • any disagreements or reportable events that occurred within the issuer’s latest two fiscal years and any interim period before the change of accountant; and
      • whether the current accountant has treated information in a different manner than the former accountant with whom the issuer has disagreed.
    • Foreign private issuers must comply with this amendment in their Form 20-F for the first fiscal year ending on or after December 15, 2009.

American Depository Receipt (“ADR”) Fees and Charges

  • New Requirement
    • ADR holders will benefit from enhanced disclosure. Currently, new fees are being charged to ADR holders in connection with sponsored ADR facilities. These new fees include an annual fee for general depositary services that was previously prohibited by some exchanges. Many holders of ADRs never see the fees that are connected with their holdings.
    • ADR fees paid in connection with ADR facilities must be disclosed in a foreign private issuer’s Form 20-F.
    • The disclosure must report fees paid by ADR holders on an annual basis, including general depository service fees. Foreign private issuers must also disclose the payments they have received from depositaries in connection with their ADR programs.
    • Compliance with ADR disclosures is set to occur in a foreign private issuer’s Form 20-F for the fiscal year ended on or after December 15, 2009.

Differences in Corporate Governance Practices

Under exchange listing requirements, foreign private issuers are generally permitted to opt out from the detailed corporate governance requirements for continued listing, with the exception of Audit Committee requirements. The opting out issuer merely needs to have its local attorney issue a letter to the exchange indicating that the opting out of particular requirements is not prohibited by the law of the issuer’s jurisdiction of incorporation.

  • New Requirement
    • A foreign private issuer whose securities are listed on a U.S. exchange must state in its Form 20-F, beginning with the report covering a fiscal year ending on or after December 15, 2008, a concise summary of the significant ways in which the issuer’s corporate governance practices differ from U.S companies listed on the same exchange.
    • To ease the burden on foreign private issuers, the SEC has not specified a particular format for the presentation of this information.